The Beginning of the End of SaaS Startups 

A few months ago we had predicted generative AI startups have no moat, no money, and now its confirmed. 

When Sam Altman claimed that the rise of generative AI chatbots like ChatGPT is going to replace customer service jobs, he wasn’t wrong. Forget jobs, he is now coming after SaaS startups. OpenAI’s recent introduction of ChatGPT Enterprise might have sent shock waves among several SaaS startups that had developed products around ChatGPT or offered wrappers around ChatGPT APIs catering to business clients.

OpenAI in their blog said that ChatGPT Enterprise comes with a new admin console that will let businesses manage team members easily and offers domain verification, SSO, and usage insights, allowing for large-scale deployment into enterprise. 

This development overlaps with services of many of the current SaaS startups who offer B2B services. Nevertheless, the introduction of ChatGPT Enterprise could potentially jeopardize their survival, as OpenAI has stepped in to offer business solutions centered on ChatGPT.  With ChatGPT Enterprise, OpenAI is further planning to launch more tools for specific roles, such as data analysts, marketers, customer support etc.

Not only this, ChatGPT Enterprise brings enterprise-level security and privacy, unlimited high-speed access to GPT-4, extended context windows for handling longer inputs, advanced data analysis functionalities, customization choices, and a host of other features, which makes it far better than ChatGPT Plus. 

Furthermore, ChatGPT Enterprise removed all usage caps, and performs up to two times faster. It  includes 32k context in Enterprise, allowing users to process four times longer inputs or files. 

To add cherry on the cake, ChatGPT Enterprise also provides unlimited access to advanced data analysis, previously known a Code Interpreter. Many companies were interested in utilizing Code Interpreter in ChatGPT Plus initially, but they held back due to worries about data security. If you explore OpenAI’s discussion forum, you’ll come across numerous requests for the Code Interpreter API.

Sneak Peek into ChatGPT-based Startups

Bito, a B2B startup based in Menlo Park, New Jersey, boasting more than 100,000 users and self-proclaimed as the “Swiss Army knife of capabilities” for software developers, has introduced an AI coding assistant fueled by ChatGPT. Additionally, they have received  $3.2 million in fresh funding.

Similarly, Yuma, a platform designed  for Shopify merchants, employs AI systems resembling ChatGPT to improve customer support. By seamlessly integrating with help desk software, Yuma offers personalized and pertinent responses to customer inquiries.

Baselit  is another startup leveraging ChatGPT technology to enable businesses to access chatbot-style analytics. Utilizing OpenAI’s GPT-3 text comprehension model, Baselit enables users to execute database queries using simple English, eliminating the need for coding expertise. 

What lies ahead for them?

It appears that the road ahead might be challenging for these startups to thrive. Convincing venture capitalists to invest was already a struggle, and as we move into the age of generative AI, having a moat becomes even more essential. Whatever moat these companies were offering  to the VCs, is already being taken care of by ChatGPT Enterprise. 

Whether it’s data analytics, customer support, marketing, or any other field, the message has been consistently clear: building your startup around ChatGPT carries risks due to the lack of true ownership as OpenAI holds the intellectual property (IP) rights to GPT-3 and all its other models. Today, these fears have come true. 

So all the startups built amidst the hype around ChatGPT, which were either using GPT in their name, or building technologies using the APIs provided by OpenAI might soon need to pack their bags. 

Startups will Lose, But Will Biggies Join Back?

This development is big enough for smaller startups to accept defeat in front of ChatGPT Enterprise. However, it needs to be seen whether big tech companies like Apple, Spotify, Wells Fargo, Samsung, JP Morgan, Verizon which had earlier ditched ChatGPT on risk of data leaks will come back and use it.

Companies like Apple had valid concerns about its employees inadvertently sharing sensitive project details through the system which might potentially be viewed by OpenAI moderators. Apple went ahead and created its own chatbot named AppleGPT for internal use.

This time OpenAI seems to be well prepared and  explicitly said it does not train on business data or conversations. Furthermore they added that ChatGPT Enterprise is SOC 2 compliant and all conversations are encrypted in transit and at rest. 

OpenAI in their blog post mentioned that industry leaders like Block, Canva, Carlyle, The Estée Lauder Companies, PwC, and Zapier are some of the few early users of ChatGPT Enterprise.